Emissions Trading Can Save Billions in Britain’s Carbon Budget

  • Government sees up to $8.7 billion in carbon savings
  • Reliance on tradable international credits seen as risky

Britain can save billions by using international carbon credits to help meet its greenhouse-gas emission targets, according to a government analysis that sets out the costs and benefits of the country’s climate policy through 2032 for the first time.

The estimated saving of as much as 6.5 billion pounds ($8.7 billion) represents 21 percent of emission-reducing technology and finance costs incurred to meet the budget for the five years starting 2028, according to the Department of Energy & Climate Change in London. Paying for emission cuts elsewhere and using the resulting credits to help meet domestic targets can “significantly” cut costs, the department said.

Britain’s fifth carbon plan, published Thursday, requires a 57 percent reduction in emissions versus 1990 levels. Current policies only deliver about half the reductions needed through the end of the next decade, and the nation risks being unprepared for stricter constraints after 2032 under the United Nations Paris climate deal, according to the government’s official climate adviser.

“What you need to be careful about is preparing your economy for the tight emission limits coming,” said Mike Thompson, the head of carbon budgets at the Committee on Climate Change in London, which advises the U.K. government.

The cost saving estimate was based on a price for emission credits of 15 pounds a metric ton of carbon dioxide. That’s the government’s low estimate and is about 47 times the price of United Nation emission credits traded on the ICE Futures Europe exchange in London. A high estimate of 65 pounds a ton would reduce the savings in the five-year period to 2.2 billion pounds, according to the analysis.

While credits can cut costs as expensive domestic emission reductions are delayed, relying too much on them may mean a country will have to pay high clean-tech incentives in future years as emission credits rise in value, Thompson said.

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